2 Answers
2

I think that your constraint of zero costs is a red herring and serves no useful purpose beside forcing you to take lopsided bets in the direction of the cheaper option. I would try instead to build a portfolio that has zero vega (hedged against overall moves in market-wide implied volatility) and zero delta (accomplished by overlaying a stock position). If possible may be able to combine additional options in your portfolio (i.e., more than two) to shield yourself against gamma exposure.

I am quite sure that other players in the market are doing this, so my guess is that this strategy, if well-diversified, could make good money before costs, but would be likely a non-trivial task to make it profitable after costs (as with most things in finance).

Actually I am trading this strategy. While the gross performance is more or less lined up with the expected one (that is, strong correlation and $\beta$ are persistent over time), net performance are very sensitive to transaction costs. $\beta$ are estimated with Gaussian Kalman filter, $R^{2}$ are extrapolated from the state-space fitting on the time series.
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Lisa AnnJul 3 '13 at 8:50

You could sell a high realized volatility against a low implied all day and bust out in a month. Doing this as a inter-stock spread isn't going to make it much of a better trade. If you want to take advantage of realized vol vs. implied vol you need a model that describes the relationship between the two.